Options Trader: Wednesday Wrapup

by: Philip Davis

I said this morning that if we got key rejections we should GET OUT and boy was I right. I didn't take my own advice and held on to a few positions but, as I said earlier, I had my CSCO profits to fall back on, otherwise I would have stopped out of everything at 12:00.

The Dow tested and failed 11,250 (my exact number) twice, at the open and at 11:50. The S&P couldn't get back to 1,285 (my number) at the same 11:50 while the Nasdaq failed 2,100 (my exact number)and the NYSE pulled back from 8,300 (also my exact number).

This is a great example of why a good trader always has shorts ready to trade but I blew it because I got all optimistic thanks to the Fed finishing and CSCO earnings.

We'll see how tomorrow goes but today was awful on the whole! Part of the blame goes to criminal charges being filed against Comverse execs as this is a time bomb that could derail any company (like Disney).

The other story of the day was the 'R word' we warned about on the weekend and the talk is starting to take hold as the Fed sent exactly the wrong message to the markets yesterday.

I held positions because I strongly felt that VIA, AIG and TGT would give us a boost tomorrow but the level of pullback we saw today left me very nervous. I mentioned in comments that the sell-off looked to uniform to be natural and that is just a gut call but a very profitable one if I'm right for going against today's grain.

Mark sent me a newsletter which showed someone is buying puts on KSS based on the theory that a 5.9% increase in same store sales won't find its way to the bottom line (where analysts are expecting a whopping 20% growth). There was a big jump in Sept $45 puts and a drop in $45 calls ahead of earnings and I love to watch these things but it's not too different from putting your chips down on a table because some other guy "had a feeling."

Oil failed to hold $67 again and perhaps that is partially explained by the action on BPT which went into party mode on word the shutdown may not be as bad as feared. Another factor is the Saudis pleading for someone to please take their oil and finding no interest AS WE ARE VERY ADEQUATELY SUPPLIED AND A 400,000 BARREL DROP JUST ISN'T A BIG ENOUGH DEAL TO MAKE US SWITCH TO SOUR CRUDE!!!

Gold had a nice quiet day and finally held $660 as the dollar drifted further into its own special oblivion and, if you don't think this is disturbing, try to remember that every cent you have is invested in dollars!

Bad, bad markets and I will miss tomorrow as I have meetings all day so best of luck to you in this mess!

I'm holding the TGT, TOL, HET & STX for September and I haven't dumped my leaps yet but I am getting worried...


VIA just announced a 10% beat but the sold off sharply today. I continue to have full confidence in our calls on this one but they just announced an acquisition of Atom that will take some time to digest.

DIS opened too high to play and spent the rest of the day going down but I like it again at $29.

CSCO was a nice pick with the $17.50s running as high as $2.50 and finishing at $2.35 (up 365%).

XOM let us out of the $70s with enough cash to fund most of the Sept $67.50 puts, which is our goal on these trades. The basis for the puts is down to .60 now and the puts are holding up well at $1.20 so far.

The TGT Sept $47.50s came in at just .75, hopefully we got this one right.

AU did just what we needed it to, giving us a nice entry and a strong day but the Sept $55s only went up to $1 (up 25%).

STX Mar $22.50s gave us an entry at $1.45 and I'm pretty happy with it.

BA killed me and I stopped out at .60 (down 25%).

BZH Sept $45s were a disaster and I had to stop out for a 20% loss and I was very lucky it recovered mid-day.

It looks like we'll get another chance to pick up the EBAY Oct $25s but I hope we have a reason to.

GE stopped me out already but that was at .75 (up a dime) so I didn't mind so much.

I swore off oil puts on the wrong day as OXY did just what we thought.

At least GMCR is coming closer to our target!

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here